Summary of this article
Sebi mandated all KRAs to have an SOP in place in case they close their operations
Before closing, KRAs are required to transfer KYC records to another Sebi-registered KRA
The exiting KRA has been mandated to constitute an Oversight Committee to oversee the winding-down process
The Securities and Exchange Board of India (Sebi) has issued new rules for ‘know-your-customer’ (KYC) registration agencies (KRAs) for facilitating winding down of their businesses in an “orderly manner”. Sebi said in a circular dated September 5, 2025, “It is decided that the process for surrender of KRA registration should be streamlined for voluntary/involuntary scenarios so that critical operations and services of KRA are wind down in orderly manner.”
New Rules For KRAs Surrendering Their License
Here are the new rules for KRAs surrendering their license that Sebi proposed earlier this year on May 20, 2025.
Transfer KYC Data To Another KRA: According to the new regulations, KRAs will have to hand over all investor KYC records to another Sebi-registered KRA. While transferring, KRAs are required to share all updates and modifications, with a full audit trail, so that no data is lost or tampered with. This is to ensure investors get uninterrupted services without having to do their KYC again.
SOP Required: Sebi said every KRA should have in place a board-approved standard operating procedure (SOP), in case the KRA decides to give up its license, whether voluntarily or due to financial stress or regulatory action. The SOP should clearly explain how the exiting KRA will transfer its key operations and services to the new KRA. The exiting KRA will also have to ensure that investor KYC data and intermediaries’ records stay safe, all contracts and legal obligations are settled, and there is no disruption in the securities market.
“The SOP should specify, the operational modalities relating to transfer of records, data, documents etc. in detail, duly considering interoperable as well as non-interoperable scenarios, as applicable,” Sebi said.
To ensure seamless transfer of KYC records, “the SOP shall be uniform and mutually agreed upon amongst KRAs,” it added.
Constitute Oversight Committee: A KRA surrendering its license will have to set up an Oversight Committee, Sebi said. This committee will keep a watch on the winding-down process, making sure the KYC data is properly transferred and investor services continue smoothly as laid out in the SOP.
In addition to these, KRAs are also required to post their SOPs on their websites within 90 days from the issuance of the circular, September 5, and review them periodically, at least once every five years.
What It Means For Investors
With the new rules in place, investors will not have to undergo the KYC verification process again or face hassles if their KRA decides to, or is compelled to, wind down their operations. For investors, this will ensure their records will be safely moved to another KRA and services will continue without disruption.
